JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
Final Examination of Intermediate Financial Accounting I
Exam Date: May 26- 2024 Maximum weight: 50 % Time allotted: 2 hour

NAME: ___________________________ID NO.: _________SECTION: ___________

GENERAL INSTRUCTIONS:

 This exam booklet has three (3) parts: Part I Ten (10) True or false questions, Part II:
fifteen (22) multiple choice questions , Part III Five(2) workout questions
 Attempt all of them.
 Read each instruction carefully and respond to all questions accordingly.
 Write your personal information both on question paper and Answer sheet.
 Any attempt of cheating on this exam is result in “F” Grade
 Using calculator is allowed but sharing with other student is strictly forbidden.
 Bringing any type of cell phone to the exam room will automatically dismissed you from
the Exam!
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO BY YOUR
INVIGILATOR!!!

Prepared by Instructor: Getachew Ali

~~~~~~~~~~~GOOD LUCK!!!~~~~~~~~~~~~~

Exam Committee Member’s Name Signature Date

1.
2.
3.
Part I:-Write true if the statement is correct & false if it’s incorrect (1 points each).
1. Closing costs associated with the acquisition of land are typically capitalized as part of
the land's cost.
2. The International Accounting Standards Board (IASB) is responsible for setting
accounting standards in the United States.
3. Transportation costs incurred to bring equipment to its intended location are typically
capitalized as part of the equipment's cost.
4. Goods shipped FOB shipping point should be included in the inventory of the seller until
they reach their destination.
5. The straight-line depreciation method results in a constant depreciation expense each
period.
6. The Allowance for Doubtful Accounts is reported on the balance sheet as a contra asset
account.
7. Bank collections are added to the bank balance when reconciling.
8. The periodic inventory system provides real-time updates on inventory quantities.
9. Segregation of duties in cash handling aims to minimize operational costs within the
organization.
10. Impairment of an asset occurs when its carrying amount exceeds its recoverable amount.
Part II: - Choose the correct answer from the given alternatives and write your
letter of choice (1.25 each)
1. What qualitative characteristic of financial reporting ensures that financial information is
available in time to influence decisions?
A. Timeliness C. Faithful representation
B. Verifiability D. Comparability
2. If a company incurs Br. 15,000 in legal fees to acquire land, how should this amount be
recorded?
A. As an expense C. As a liability
B. Added to the cost of the land D. As revenue
3. Which organization is primarily responsible for the enforcement of financial regulations in
the United States?
A. Financial Accounting Standards Board (FASB)
B. International Accounting Standards Board (IASB)
C. Securities and Exchange Commission (SEC)
D. Governmental Accounting Standards Board (GASB)
4. What is the journal entry to record the write-off of an uncollectible account using the
allowance method?
A. Debit Allowance for Doubtful Accounts, Credit Accounts Receivable
B. Debit Bad Debt Expense, Credit Allowance for Doubtful Accounts
C. Debit Accounts Receivable, Credit Allowance for Doubtful Accounts
D. Debit Bad Debt Expense, Credit Accounts Receivable
5. What is the primary regulatory body responsible for setting financial reporting standards in
Ethiopia?
A. Financial Standards Board of Ethiopia C. Ethiopian Revenue and Customs
B. Accounting and Auditing Board of Authority
Ethiopia D. Ministry of Finance and Economic
Development
6. XYZ Company purchased equipment for Br. 500,000 and incurred Br. 20,000 in
transportation costs. What amount should be capitalized?
A. Br. 500,000 C. Br. 520,000
B. Br. 20,000 D. Br. 480,000
7. What is the responsibility of AABE?
A. Taxation enforcement C. Managing government budgets
B. Issuing accounting and auditing D. Conducting financial audits
standards
8. The monetary unit assumption in financial accounting assumes that:
A. Business transactions can be measured in monetary units
B. The business will continue operating indefinitely
C. Financial statements are prepared using fair value
D. The business is separate from its owners and other entities
9. Goods in transit shipped FOB destination should be:
A. Included in the inventory of the buyer
B. Included in the inventory of the seller
C. Included in the inventory of the shipping company
D. Excluded from inventory until received
10. On January 1, 2023, ABC Ltd. purchases a machine for Br. 90,000. ABC estimates the
residual value of the machine is Br. 10,000 with a five-year life. The company's fiscal year
ends on December 31. What is the depreciation charge for 2023 if the company uses the
straight-line method?
A. Br. 20,000 C. Br. 18,000
B. Br. 16,000 D. Br. 15,000
11. The carrying amount of LMN's building is Br. 800,000, its fair value less costs to sell is Br.
760,000, and its value-in-use is Br. 750,000. What is the amount of impairment?
A. Br. 40,000 C. Br. 10,000
B. Br. 50,000 D. No impairment
12. Impairment of an asset is recognized when:
A. The asset's carrying amount exceeds its recoverable amount
B. The asset's fair value exceeds its carrying amount
C. The asset's recoverable amount exceeds its carrying amount
D. The asset's fair value is less than its historical cost
13. The carrying amount of an asset is:
A. The original cost of the asset C. The original cost of the asset less
B. The accumulated depreciation of the accumulated depreciation
asset D. The fair value of the asset
14. What is the main reason for maintaining inventory in a business?
A. To maximize profit margins
B. To minimize storage costs
C. To ensure availability of goods for customers and smooth production processes
D. To reduce tax liabilities
15. Which method of estimating bad debts uses a historical percentage of credit sales?
A. Aging of Accounts Receivable C. Percentage of Credit Sales Method
B. Direct Write-off Method D. Allowance for Doubtful Accounts Method
16. Which of the following is subtracted from the bank balance when reconciling?
A. Outstanding checks C. Deposits in transit
B. Depositor errors D. Bank collections
17. What does the term "NSF" stand for in the context of bank reconciliation?
A. Net Savings Fee C. National Security Fund
B. Non-Sufficient Funds D. Noted Service Fee
18. If a deposit is recorded by the bank but not yet by the company, it is considered as:
A. Outstanding deposit C. Bank error
B. Deposit in transit D. Bank collection
19. What is the primary purpose of segregation of duties in an accounting system?
A. To increase efficiency C. To expedite financial reporting
B. To enhance internal control D. To minimize operational costs
20. Merchandise available for sale equals:
A. Ending Inventory + Purchases + Transportation Charges
B. Beginning Inventory + Net Purchases
C. Sales less Cost of Goods Sold
D. None of the above
21. Green Company's ending inventory is understated by 4,000 Birr. The effects of this error on
the current year's cost of goods sold and net income, respectively, are:
A. Understated, overstated C. Overstated, understated
B. Overstated, overstated D. Understated, understated
22. ABC Inc. purchased land and building from XYZ Corporation for a cash payment of Br.
480,000. The estimated fair values of the assets are land Br. 220,000, and building Br. 280,000.
At what amounts should each of the assets be recorded respectively?
A. Br. 240,000, Br. 240,000 C. Br. 480,000, Br. 480,000
B. Br. 220,000, Br. 280,000 D. Br. 211,200, Br. 268,800
Part III Workout the following questions by showing all necessary steps( 12 marks)
1. Bank Reconciliation Question:
The bank statement for Laird Company shows a balance per bank of Br. 15,907.45 on April 30,
2023. On this date, the balance of cash per books is Br. 11,589.45. Using the four reconciliation
steps, Laird determines the following reconciling items:
Step 1. Deposits In Transit: April 30 deposit (received by bank on May 1). Br. 2,201.40
Step 2. Outstanding Checks: No. 453, Br. 3,000.00; no. 457, Br. 1,401.30; no. 460, Br. 1,502.70.
Total: Br. 5,904.00
Step 3. Errors: Laird wrote check no. 443 for Br. 1,226.00, and the bank correctly paid that
amount. However, Laird recorded the check as Br. 1,262.00. Difference: Br. 36.00
Step 4. Bank Memoranda:
a. Credit—Collection of note receivable for Br. 1,000 plus interest earned Br. 50, less bank
collection fee Br. 15.00. Total: Br. 1,035.00
b. Debit—NSF check from J. R. Baron for Br. 425.60
c. Debit—Charge for printing company checks Br. 30.00
Required
A. Prepare bank reconciliation dated April, 30, 2023. (5 mark)
B. Prepare the necessary journal entries. (3 mark)
2. Depreciation Questions:
Machine Purchase price: Birr 70,000
Estimated Salvage Value: Birr 10,000
Estimated Useful Life: 4 years
Estimated Units of Production: 10,000 units
Calculate the following:
A. The depreciation amount for the third year using the straight-line method. (2 marks)
B. The depreciation amount if the owner has produced 1,200 units during the first year. (2
marks).
 ANSWER SHEET:

Name_____________________________Id.no_____________ Time allowed 2 hrs

True or False Multiple Choice

1 1 11 21

2 2 12 22

3 3 13

4 4 14

5 5 15

6 6 16

7 7 17

8 8 18

9 9 19

10 10 20